January 23, 2012

We Hear From The Paul The Persecuted Prognosticator

I happen to agree with the mainstream view that a US recovery seems to be underway. But this from the Persecuted Prognosticator drew my eye:

On housing: as everyone now knows (but oh, the abuse heaped on anyone pointing it out while it was happening!), we had a monstrous housing bubble between 2000 and 2006. Home prices soared, and there was clearly a lot of overbuilding. When the bubble burst, construction — which had been the economy’s main driver during the alleged “Bush boom” — plunged.

First, let's pause a moment and imagine the plight of a persecuted Times pundit who spent the Bush years, well, bashing Bush. It must have gotten lonely.

And let's replay (yet again!) his Nostradamus-like insight into the housing bubble, offered in May of 2006:

Ben Bernanke, the chairman of the Federal Reserve, contends that what's happening in the housing market is "a very orderly and moderate kind of cooling." Maybe he's right. But if he isn't, the stock market drop of the last two days will be remembered as the start of a serious economic slowdown.

Maybe the bubble will end with "a serious slowdown", or maybe not. Golly, I bet he did get abused for that. Of course, I don't see his predictions of a trillion dollar Federal bail-out of Fannie, Freddie and the US financial system, but maybe that is par for a "serious slowdown."

And while we're here, let's pick up on his admission that "Home prices soared, and there was clearly a lot of overbuilding". This seems to represent backtracking from what Krugman described as "one of the best pure-economic pieces I’ve done in my tenure at the Times". As Krugman explained in the referenced 2005 piece, in areas where lots of building is possible, home prices don't tend to rise - instead, new construction meets the new demand. Fair enough, but... Krugman then went off the rails, for example in this 2010 column, by arguing thusly:

To appreciate Georgia’s specialness, you need to realize that the housing bubble was a geographically uneven affair. Basically, prices rose sharply only where zoning restrictions and other factors limited the construction of new houses. In the rest of the country — what I once dubbed Flatland — permissive zoning and abundant land make it easy to increase the housing supply, a situation that prevented big price increases and therefore prevented a serious bubble.

Most of the post-bubble hangover is concentrated in states where home prices soared, then fell back to earth, leaving many homeowners with negative equity — houses worth less than their mortgages. It’s no accident that Florida, Nevada and Arizona lead the nation in both negative equity and mortgage delinquencies; prices more than doubled in Miami, Las Vegas and Phoenix, and have subsequently suffered some of the biggest declines.

As I pointed out at the time, Krugman's notion that price collapses couldn't follow an era of high construction failed to recognize that decreases in housing supply are not nearly as easily managed as increases. Typically, developers cut prices rather than bulldoze new construction (or any other existing housing stock), so the supply curve is quite inelastic on the way down.

Now, one might have thought that Las Vegas, cited above, was an example of a city that saw a lot of new construction yet experienced price collapses. Not so fast! In a 2006 post, Krugman explained that land use restraints limited construction there. Hmm - the numbers I dredged up (p. 9) showed that total housing units in Las Vegas rose from 559,799 to 819,600 from 2008 to 2009, an increase of 46%; by way of comparson, the housing stock in New York and Los Angeles rose by 4.7 and 3.1% over a similar period. And this report tells us about the Atlanta region:

The vast majority of housing available in the Atlanta region has been constructed over the past 40 years. In fact more than 20 percent of the housing stock in the Atlanta region was built between 2000 and 2007.

So Las Vegas had notably more new construction than Atlanta (on a percentage basis), yet to preserve his "best" effort Krugman wants to imagine that his model correctly places Las Vegas with LA and New York as tightly zoned areas distinct from places like Atlanta, where construction is easy. This is reality-based?

Well, we do have his current admission that overbuilding can be a problem, so we see him toddling towards the truth.

WHAT WERE ONCE VICES ARE NOW VIRTUES: I love to death Krugman's explanation of how the Obama recovery might take hold:

And after a protracted slump in housing starts, America now looks seriously underprovided with houses, at least by historical standards.

...

So why aren’t people going out and buying? Because the depressed state of the economy leaves many people who would normally be buying homes either unable to afford them or too worried about job prospects to take the risk.

But the economy is depressed, in large part, because of the housing bust, which immediately suggests the possibility of a virtuous circle: an improving economy leads to a surge in home purchases, which leads to more construction, which strengthens the economy further, and so on. And if you squint hard at recent data, it looks as if something like that may be starting: home sales are up, unemployment claims are down, and builders’ confidence is rising.

Now, this notion that the US economy could ride the housing market to recovery until other horses took over was the strategy employed in the 2002-2006 bubble era, and in fact, was the strategy advocated by Paul Krugman in 2001. But since we are now, by some uncited standard, "seriously underprovided" with housing, well, away we go again. And this time, unlike the 80's or the 00's, a real estate boom won't be followed by a real estate crash. No, I don't know why not either - perhaps because geniuses like Krugman will warn us in time that things may end badly, unless they don't.

I'm not sure what potential home buyers worry about more: the possibility of losing their jobs as Krugman seems to think is the case, or, as I think is a bigger problem, the fear that housing prices will collapse even further due to the backlog in processing foreclosures and the impact of millions of underwater homeowners potentially walking away from their mortgages or having government redraw their mortgages.

Steve-- it doesn't matter why people aren't buying homes-- the pertinent point is they are not. That is one of the many reasons that exposes the BS that Krugman is pushing. And what BS is that? "properity is just around the corner"-- "Barry and Timmie and Bernie have this covered", "re-elect Barry adn all will be fine." It's the same BS as 2008, Hope and Change and Unicorns.

C, John Kerry was chairman of the Senate foreign Relations Committee when John Kriakou was hired as an investigator for the committee. Former CIA agent Kriakou had his first appearence in Federal Court today .

"The launch coincides with the kick-off of the American Meteorological Society’s (AMS) annual meeting in New Orleans, LA."

“This is an important moment in the history of the AMS,” said Daniel Souweine, the campaign’s director. “It’s well known that large numbers of meteorologists are climate change deniers. It’s essential that the AMS Council resist pressure from these deniers and pass the strong statement currently under consideration.”

Potential buyers may get frozen out of the market in order to let government have a big Program that proves they are Doing Something and (surprise!) results in letting the cronies win at the expense of the rest of us (LUN).

"showed that total housing units in Las Vegas rose from 559,799 to 819,600 from 2008 to 2009, an increase of 46%"

Should be 2000 to 2009. The 5.8% annual rate of increase is perfectly coincidental with the rate of increase in resident employment.

If one wished to actually test the Flatlander hypothesis, I'd suggest looking at Seattle metro versus Dallas metro. Boredom with the subject prevents me from doing so but comparing a major Blue Hell to a minor Blue Hell isn't going to ever going to be particularly convincing.

Krugman is trying to strike sparks to ignite a housing recovery that is not going to flower until 1600 Pennsylvania Avenue has a new tenant.

I think someone is worried that Obama will be tied to Alinsky. I see they are rehabilitating Alinsky even as I type...he wasn't a socialist, he didn't want to change our system, Newt is more like Alinsky than he knows, yada yada...

I played "no check" hockey for years while in my 40's and 50's and the only time one of us got hurt was when we tripped and fell into the boards. But even then its hard to get black eyes and busted nose when you are wearing helmets, face guards and caged masks. What a phony.

The case against John Kiriakou, who served as a senior Senate aide after ending his CIA career, extends the Obama administration's unprecedented crackdown on disclosures of national security secrets to journalists.

This is how the WaPo is reporting it. I am shaking my head wondering what they would be saying if Bush and Gonzales were in charge.

I have mixed feelings about snubbing the POTUS. I love that he feels the same way I do, but I would rather he just not attend and keep his reasons to himself. If others want to guess at it, fine, but that's just me. Respect the office even if the fool in the office doesn't respect it. Or me.

The short-run economic imperative was to identify as many campaign promisesor high priority items that would spend out quickly and be inherently temporary. … The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.

(CNSNews.com) – President Barack Obama says the 39th anniversary of Roe v. Wade is the chance to recognize the “fundamental constitutional right” to abortion and to “continue our efforts to ensure that our daughters have the same rights, freedoms, and opportunities as our sons to fulfill their dreams.”

I assume that Obama understands what our sons' dreams are at that age.

(Btw, mine showed me the dozens of parody videos that have cropped up in the week since the original went viral. The kid has an agent, shirts already on sale, has been to Canada for interviews, etc.)

one of the paramount skills of a good politician is to take a difficult question and answer another question, often hypothetical, entirely.

I believe the Republicans would be well served to do so during their upcoming debates. Each should take at topic where the Obama administration is weak, and when a question is asked, address that, rather than the question.

No attack dog politics, and a message that can be honed debate after debate. It would drive the moderators and pundits nuts. As the MSM do their best to tear apart each of the candidates the only beneficiary is the clown who will be giving the SOTU campaign speech tomorrow night.

MarkO--"...they are what we thought they were" Exactly right-- even Summers is just a shameless political hack. We are on the hook for $1.1 TRILLION in debt (including %) so 'Bam could deliver the bacon to his crony contributors. People should go to jail for this.

Sarah Palin in an interview with Eric Bolling about Chris Cristie's Newt is an embarrassment to the party remark:

“I do care to take him to task -- poor Chris. This was a rookie mistake. He played right into the media’s hands. Here’s a host that asked Chris, ‘Does Newt embarrass the party.’ I think he asked him twice, and there Chris played right into it and spewed that about Newt embarrassing the party. Sometimes if your candidate loses in just one step along this path, as was the case when Romney lost to Newt the other night and of course, Romney is Chris Christie’s guy, you kind of get your panties in a wad and you may say things that you regret later. And I think that that’s what Chris Christie did. His response to what the media was asking him was reflective of a lack of self-discipline. I’ve learned my lessons all along the way, too, and not responding, not playing into the media’s hands when they’re trying to get you to say something like is this candidate an embarrassment to your party?”

How does it feel to get thrown under the bus, John, after fingering your colleagues
and furthering the Journolist meme de jour;

According to a declassified document filed with the court after the Libby trial and obtained by Mother Jones, Kiriakou authored a June 10, 2003, email sent to several CIA officials. The message apparently was written in response to intense efforts at that time by the vice president's office to learn how Plame's husband, Ambassador Joseph Wilson, had been selected to go on a CIA-sponsored fact-finding mission to Niger.

Whatever, he/she is not a Mitt fan and I wonder how Sara feels about proselytizing us but can't her son:) We are not only Dana's experiment but we are also Sara's.

Already in Florida, we have more people voting early today than all the votes cast so far in Iowa, NH and SC combined. Amazing how much we put into those 3 states while the 4th largest is sitting down there saying "hey, how about me?"

Tonight's debate is Mitts death knell. He has no friends in the audience and he is going for Newt's jugular. Bad move. He should be going for Obama's instead if he wants to win the people on the First Coast.

"This will mark the third time in four years the president has missed his statutory requirement to present a budget on time, while trillion-dollar budget deficits continue to mount. As the president announces another missed deadline, tomorrow marks the 1,000th day Senate Democrats have gone without any budget at all," said House Budget Committee Chairman Paul Ryan, R-Wis.

Well, JiB - I will be curious to see the audience reaction at the debate tonight. Some of the networks keep a tighter lid on audience expression during debates than others. I am rather betting NBC will do everything in its power to do that tonight.

Brett Baier can get much better panel participants here than from the A. B. Stoddard kind of crowd who only get their information by hanging around the Occidental or Monocles. She is one of those babes and even wimpy guys I have met in my time back in the day who know only what they pick up over a glass of chardonnay and a pat on the leg. blink, blink:)

We really need to read what the local press is saying in terms of what is going on instead of listening to DC. And I am as guilty as anyone when it comes to not doing it.